Introducing: The Minswap Launch Bowl
TLDR; presenting the Minswap Launch Bowl, which encompasses the initiatives other projects can use to bootstrap their Liquidity on Minswap.
Minswap is entering a new Phase. After having launched the DEX, giving the ability for Cardano DeFi enthusiasts to Swap, Provide Liquidity and Farm in a wide array of Pairs in a smooth manner, it’s now time to leverage our platform to empower the growth of the Cardano DeFi space even further. The Vision is for Minswap to become the hub for promising projects to launch and increase their liquidity by using some of the most potent DeFi primitives offered directly on the Minswap platform.
We are very excited to be sharing in this article for the first time the 3 initiatives (3, for now!) that constitute the Minswap Launch Bowl and that we have designed to strive towards this Vision, namely: Classical Listing, LBE as a Service, and Collective Zap-in. But, before we start describing them, let’s talk a bit about liquidity and why it’s important for promising Cardano projects to strategize around it.
Liquidity is key in DeFi in order to enable a positive trading experience. The more liquid a pool, the less slippage/price impact there is (the difference between market price and the price users are going to get). Thus, for both projects and the Minswap DEX, it’s important to have a liquid pool, as this means tokens can be traded without incurring high costs, resulting in a better UX.
Another important part of liquidity revolves around Protocol Owned Liquidity (POL). It entails a Protocol owning a share of its own Liquidity Pool (in the case of Minswap, it would for instance be MIN/ADA LP Tokens). Because of its many advantages (such as stability and revenue generation), POL is very likely to be an ongoing and evolving feature of the DeFi landscape. Therefore, the Minswap Launch Bowl aims to facilitate other protocols with ways to increase both their liquidity on Minswap and their POL, bringing the entire Cardano ecosystem forward.
The Classical Listing is a method recommended for projects which have a significant treasury, which they can utilize to seed their own token Pair. In this approach, the Project sets aside a % of their total supply (e.g 0.5%-5%) to be provided in the Liquidity Pool, and pairs it with the equivalent ADA from their treasury in order to grow the liquidity of the pool to a substantial amount where the trading experience is positive (we recommend more than 50k ADA TVL).
However, in many cases, the Classical Listing will not grow a pool to a sufficient amount to adjust to the requirements of obtaining a MIN Farm (600k — 700k ADA TVL). For this purpose, we have designed the Mouse Farm, aimed at promising projects that want to increase their Liquidity on Minswap and get a MIN Farm but have a low TVL. In exchange, these projects need to offer their token in a Double Farm program (you can read more about how Double Farms work on Minswap here) to more efficiently grow the Liquidity on the particular Pair.
LBE as a Service (LBEaaS)
When Minswap launched, we recognised the need for a deep Liquidity Pool and that a significant part of it should be POL (owned by the Minswap DAO), so we designed our LBE (Liquidity Bootstrapping Event) with that in mind. With over 25mn ADA supplied, half of which is currently held by the DAO, the LBE was a resounding success. Now, we are opening up this method to the Cardano Community, for projects to use it to bootstrap their Liquidity on Minswap.
The LBE as a Service is designed for projects which want to launch a token when it is not yet into circulation. The project sets a % of their total token supply aside (for instance, 2% of total token supply), and LBEaaS participants have a fixed time period (e.g. 10 days) during which they can supply ADA. After that period, the ADA from Participants and the tokens from the project get put together, and the initial Liquidity Pool is created.
Participants obtain 50% of the resulting Liquidity Pool (in form of LP Tokens of ADA and the project’s token), as well as an NFT (which might act as a booster) for participating. Essentially, by supplying ADA in this event, participants will effectively swap half of the ADA they supply for the project’s token, at the price which is fairly discovered at the end. Participants benefit by having the chance to obtain the project’s token in bulk for the first time, as well as a potential farming boost from the NFT, in a way that is congestion-friendly and not subject to front-running.
The Project which uses the LBEaaS remains with the other 50% of the resulting Liquidity Pool, which de facto becomes POL. With this method, the price in respect to ADA of the project’s token is decided by the market (in how much ADA gets supplied) and the project does not need to have a significant treasury to bootstrap their pool, as the liquidity is crowdsourced.
Collective Zap-in (CZI)
The Collective Zap-in is a new method that we are excited to be pioneering! It aims to capitalize on the advantages of both the LBEaaS (POL, fair price, good UX) and the Classical Listing (Double Farm to incentivise Liquidity). Succinctly put, it could be said the Collective Zap-in is the LBEaaS, but for projects that already have a Liquidity Pool on Minswap.
So, how does it work? Because if the token in question is already trading, that means we cannot add liquidity to its Pool at a different rate than the one that it’s currently trading at. The solution is to ADA-Cost-Average (ACA) the Liquidity Provision into the Project Token/ADA Pool that is trading. In essence, participants are given a time period (e.g. 2 weeks) to supply ADA to the Collective Zap-in event, and every set amount of hours, the ADA that was supplied gets paired with some of the project’s tokens that were set aside, and provided to the existing Liquidity Pool.
Participants obtain their LP Tokens at the end of the event according to the amount of ADA they supplied, and everyone will receive the LP Tokens at the same price, regardless of when they provided the ADA. When you provide ADA in the event, you are swapping half of it for the project’s Token at the price established at the end, when the LP Tokens are distributed. Hence the name “Collective Zap-in’’ ⚡. As an incentive to partake, CZI participants also obtain an NFT, which would act as a booster on the Double Farm that follows up after the event.
The Project which uses the CZI remains with the other 50% of the resulting Liquidity Pool, which de facto becomes POL. The price in respect to ADA of the project’s token is decided by the market dynamically while the token is being traded. Similarly to the LBEaaS, the project does not need to have a significant treasury to conduct it, as the liquidity is crowdsourced.
Throughout the past weeks, we have been actively engaging with several Cardano projects interested in increasing their Liquidity on Minswap through the methods mentioned above. It’s important to note that each of the approaches mentioned can be conditioned to the needs of the particular projects. For instance, if a project wanted to do an LBE, but also use it to raise some funds for development, a % of the LP Tokens that should go to POL could be directed as ADA instead to the treasury of the project.
Another important aspect to consider is how the Minswap DAO can benefit from such initiatives in ways apart from the increase in TVL and Trading Volume on the DEX. In the LBEaaS and the CZI, we think a logical step is that the project in question pays a fee in the form of the POL they gain (e.g 1% to 5%) for the service and support of Minswap throughout the event. This POL would belong to the Minswap DAO, therefore increasing and diversifying its POL. On the Classical Listing, if projects offer their token in a Double Farm, Minswap Community members can benefit from the extra yield. If you have more ideas on how these initiatives could benefit the Minswap Community, please let us know in the #💡┃ideas channel on our Discord!
This article was meant to give a light overview of the initiatives we are working towards, so expect more detailed resources diving into these approaches in the coming weeks!